Completing Rs 6 Trillion Monetisation: Reality or Gimmickry?

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The National Monetisation Pipeline (NMP) was announced as part of the 2021-22 Budget. Accompanied by a lengthy release from the Press Information Bureau (PIB), it was launched by the Finance Minister in August 2021. The goal was to carry out the monetisation of public assets worth Rs 6 trillion.

Detailed in two comprehensive volumes and prepared under the supervision of NITI Aayog, the NMP listed specific monetisation targets for sectors and assets of the central government ministries and public sector enterprises (PSEs) to be implemented during the four years (2021-22 to 2024-25).

Its implementation has been a relatively low-key affair. No PIB press release was issued in the first two financial years (2021-22 and 2022-23), although some informal and cryptic media briefings were made by NITI Aayog officials, asserting significant accomplishment of their objectives.

In their first official press release, on 19 June 2024, the PIB claimed that the NMP had monetised Rs 3.85 trillion of assets in three years and for 2023-24, monetisation of Rs 1.56 trillion was achieved against the target of 1.8 trillion.

Roads (Rs 1.60 trillion) and Railways (Rs 1.53 trillion) were expected to contribute more than 50 percent of the monetisation target, while mining (with no specific mention of coal) was expected to bring in a maximum of Rs 28,747 crore.

The press release reported zero monetisation receipts from Railways and the highest achievement of Rs 57,794 crore from the coal sector for 2023-24.

What has been happening in the monetisation pipeline? Monetisation is all about receiving capitalised value upfront against the stream of future receipts. Have the PSEs/ government received any such capital payments Has zero monetisation by Railways and many others led to non-genuine monetisation being included as achievements?

Thirteen Sectors and Two Monetisation Models

In addition to the roads, railways and mining mentioned above, power transmission (Rs 45,000 crore), power generation (Rs 39,832 crore), telecom (Rs 35,100 crore), warehousing (Rs 28,900 crore), natural gas pipelines (Rs 24,462 crore), product pipelines/others (Rs 22,504 crore), aviation (Rs 20,782 crore), ports (Rs 12,828 crore) and stadiums (Rs 11,450 crore) were the other sectors listed in NMP for bringing in the rest of monetised moolah.

The NMP describes the fundamental process of monetisation and proposes two basic models for the same.

First, direct contract approach (DCA) considers concessions like build, operate and transfer (BOT etc.) monetisation whereby the government/ PSE enters into a concession contract for any specific asset. They transfer, the right to collect tolls and other revenues against upfront payment as well as the responsibility of operation and maintenance.

Second, the structured financing model (SFM) wherein the asset (constructed, incomplete or new) is transferred to a financing vehicle like REIT, InVIT etc., sponsored by the government/ PSE retaining significant ownership stake, for raising equity for capital investment from private funds.

Most of the assets identified in the NMP were to be monetised using the first method.

Most Ministries Fail

There is no culture of monetisation in most of the ministries/PSEs identified in the NMP. Some did not initiate any steps, while others made half-hearted attempts.

Railways, targeted to monetise railway tracks, stations etc. of Rs 1.6 trillion, attempted monetisation in the first year, could achieve no headway, and fell out of the pipeline, resulting in zero monetisation.

The government successfully monetised six airports pre-NMP in the years 2018-20. The government unnecessarily muddled this effective model by deciding to include both unviable and viable airports in the monetisation plan. Approvals were obtained, but no tendering was undertaken, rendering the targeted Rs 20,782 crore from airport monetisation defunct.

GAIL identified a few natural gas pipelines reluctantly and issued the bids. There were no results. GAIL stopped its efforts, throwing Rs 24,462 crore of natural gas pipeline projects from the pipeline.

Power Grid had earlier carried out a transmission grid monetisation successfully pre-NMP in 2020-21. In the NMP era, Power Grid did not execute a single monetisation transaction, leaving Rs 45,200 crore expected from power transmission monetisation completely stranded.

Telecom/BSNL were to monetise towers, land and building assets of Rs 35,000 crore. Instead, the government ended up parting with three revival packages costing over Rs 3 trillion.  

A few ministries/ PSEs on the original monetisation champions list did not make significant efforts either—stadiums (Rs 11,450 crore), warehousing (Rs 28,900 crore) etc. saw no activity. As much as three-fourth of the originally envisaged monetisation pipeline simply saw no throughput.

Road Sector Saved Blushes

The PIB press release for 2023-24 attributes monetisation of Rs 40,314 crore to the road sector. In a press release issued in February 2024, it was claimed that the Ministry of Road Transport and Highways (MoRTH)/NHAI’s monetisation crossed Rs 1 trillion.

The NHAI has been successfully monetising road assets before the NMP. In 2018-19, in the first ever monetisation transaction, NHAI successfully raised over Rs 9,000 crore from a toll, operate, and transfer (TOT) transactions.

Of the Rs 1 trillion monetisation by MoRTH/ NHAI, Rs 42,334 crore was raised through TOT, Rs 26,125 crore through InvITs and Rs 42,000 crore through securitisation. TOT transactions are undoubtedly genuine monetisation transactions.

NHAI established the National Highways Infra Trust (NHIT) and transferred its select road assets to special purpose vehicles (SPVs) owned by the NHIT. NHAI effectively continues to manage these road assets through investment manager National Highways Infra Investment Managers Private Limited (NHIIMPL), owned by the government, and project manager National Highways InVIT Project Managers Private Limited (NHIPMPL), wholly owned by NHAI.

Ideally, only the share of private investors (about 50-60 percent) of the total Rs 26,125 crore raised through InVIT transactions should be counted as monetisation. However, considering all Rs 26,125 as monetisation proceeds is not particularly consequential. The remaining transaction—debt raised through securitisation of Rs 42,000 crore—was a far lower number.

Despite these weaknesses, the monetisation of road assets by MoRTH/NHAI has been the most successful execution of NMP.

Monetisation Gimmickry

While none of the other 13 original monetisation champions could acquit themselves well in the monetisation sweepstakes, new interlopers came in to make a mark.

The Ministry of Coal has publicly claimed that it carried out monetisation of Rs 40,105 crore in 2021-22 and Rs 57,180 crore in 2022-23. For 2023-24, it targeted Rs 50,118 crore and achieved Rs 56,794 crore, which was well over target. A new target of Rs 54,721 crore in 2024-25 has been announced.

Initially, the Ministry of Coal was not envisaged to contribute anything to the original NMP target. With current predictions, it will end up being the most ‘successful’ monetiser.

In the first three years of NMP, the Ministry of Coal could achieve monetisation of a humungous Rs 1.54 trillion, around 40 percent of the total claimed monetisation of Rs 3.85 trillion. In case the Ministry of Coal achieves its 2024-25 target (which is quite likely considering its past performance), it would contribute Rs 2.09 trillion to the total NMP target of Rs 6 trillion—single-handedly achieving more than one-third of the total monetisation target.

Incidentally, the auction of coal mines is not considered monetisation. Monetisation involves receiving a discounted stream of future revenues upfront from any mining concession. Since the government sets future royalty payments at the time of coal auctions, labelling these auctions as monetisation is nothing short of gimmickry.

Monetisation is Not Easy; It’s Time to Be Honest

Almost all of the original sectoral ministries/ PSEs (except the road sector) failed to undertake any real monetisation. Monetisation is, understandably, a difficult proposition. With better transparency, this failure could be explained and processes improved for the future.

There is no point in making false claims about monetisation when it is not being undertaken. To be honest, providing a truthful account of the performance of the monetisation pipeline and undertaking real monetisation transactions by investing in state capacity is what needs to be done to meet targets.

(The author is former Economic Affairs Secretary and former Finance Secretary of India. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)